2009 (1) TMI 730 - AT - Central Excise

Summary

Issues Involved:
1. Demand of differential duty on M/s. Kaveri Pet and Polyforms Pvt. Ltd. (KPPL).
2. Imposition of penalty on M/s. Nilkamal Ltd. (NPL).

Summary:

1. Demand of Differential Duty on KPPL:
The appellant KPPL, engaged in manufacturing plastic moulded items for NPL on a job work basis, included the cost of raw materials, processing charges, profit, and amortized cost of moulds supplied by NPL in the assessable value. The department contended that KPPL and NPL should be treated as related persons for Central Excise valuation, and the assessable value should be based on the sale price of NPL. The Adjudicating Authority confirmed the demand of Cenvat Duty Rs. 1,89,67,500/- and Education Cess Rs. 3,79,350/- for the period 1-6-2004 to 31-5-2006, and Cenvat Duty Rs. 49,67,960/- and Education Cess Rs. 99,359/- for the period 1-6-2006 to 31-12-2006, under Section 11A(2) of the Central Excise Act, 1944, along with interest u/s 11AB and penalties u/s 11AC and Rule 25 of the Central Excise Rules, 2002.

2. Imposition of Penalty on NPL:
The Adjudicating Authority imposed a penalty of Rs. 10,00,000/- and Rs. 1,00,000/- on NPL under Rule 26 of the Central Excise Rules, 2002, for not disclosing the arrangement with KPPL to the authorities.

Judgment:
The Tribunal found that the Adjudicating Authority did not conclusively establish mutuality of interest between KPPL and NPL. It was undisputed that KPPL amortized the value of the moulds supplied free of cost by NPL. The Tribunal referred to the Supreme Court's decision in Union of India & Others v. Atic Industries Ltd. (1984 (17) E.L.T. 323 (S.C.)) and the Tribunal's decision in Commissioner of Central Excise, Bangalore-III v. Campco (2006 (199) E.L.T. 630 (Tri.-Bang.)), which clarified that mutuality of interest requires both parties to have a direct or indirect interest in each other's business. The Tribunal concluded that there was no mutuality of interest between KPPL and NPL, and the transactions were on a principal-to-principal basis. Consequently, the Tribunal set aside the impugned order, allowed the appeals, and nullified the penalties imposed on NPL. The issue of limitation was not addressed as the appeals were allowed on merits.

Operative Portion:
The Tribunal pronounced the operative portion of the order in open court on the conclusion of the hearing.